Moscow to Washington – ‘quid pro quo’

Kremlin has been actively preparing a response to the highly probable sanctions from the US awaited by the end of this week. According to Kommersant newspaper sources, the Foreign Ministry suggested the Russian authorities seizure of the summer residence of the American Embassy in woodland ‘Serebryany Bor’ (‘Silver forest’), situated on artificial island of Moskwa river, and their storage facilities. This will be a symmetrical response to the arrest imposed on Russian diplomatic property in the US by the previous administration.

In addition, 35 American diplomats can be expelled from the country – the same number of staff of the Russian Embassy in Washington was ordered to leave the US in December last year. Also, the Russian side is considering the possibility of limiting the maximum number of employees of the American diplomatic mission in Moscow, currently exceeding the number of Russians in the embassy in Washington.

Kremlin can create complications for the United States in the UN Security Council, where the States are seeking to increase pressure on North Korea.

Moscow’s economic sanctions against Washington can be expressed in direct circumcision of trade turnover, restrictions on the work of American companies in the country and some form of withdrawal of investments already made by them in Russia.

Possible restrictions on the part of exports from Russia to the United States may be quite sensitive, but with no less serious adverse effect.

Kommersant points out that the United States has been critically dependent on deliveries of a Russian enriched uranium product for its nuclear power plants over the last decades. Since 2015, the supplies have gone through direct commercial contracts with US energy companies and Russia has received a quota of 20% of the market. The possible halt of supplies will hurt both sides: the US will have to seek replacement of the Russian deliveries in the market with a small number of players, and Russia to quickly find a replacement for American buyers.

Another double-edged area is the supply of titanium. The US remains the main export market for Russian VSMPO-AVISMA, the world’s largest titanium producer operating in business with aerospace companies around the world. In 2016 the country provided the company with 32% of shipments and 48% of export sales. It is Russia that covers more than a third of the needs of the aircraft-building Boeing.

Even stronger economic impact can be caused by the limitation of the work of American companies in Russia. They are most widely represented in the consumer market and in IT. Moscow has already successfully tested in the case of Europe. American Coca-Cola and PepsiCo are the absolute leaders in the production of soft drinks: companies in Russia have their own plants for the production of soda and juices. No less popular in Russia are American IT companies Google, Facebook, Apple, Adobe and Microsoft. Also, the ban can affect the pharmaceutical market.

The US Congress announced that the upper house – the Senate – could vote on the draft law on sanctions until the end of this week.